Co-owners of Russia's Nornickel back in fight for control

MOSCOW/LONDON (Reuters) - A power struggle over Norilsk Nickel (Nornickel) (GMKN.MM) resurfaced on Friday as billionaire Vladimir Potanin offered to buy Roman Abramovich’s stake in the mining group, and a third businessman - Oleg Deripaska - tried to block the deal.

The logo of Russia's miner Norilsk Nickel (Nornickel) is seen on a board at the St. Petersburg International Economic Forum 2017 (SPIEF 2017) in St. Petersburg, Russia, June 1, 2017. REUTERS/Sergei Karpukhin

The fight between the billionaires revives a long-running battle for control of Nornickel, a $33 billion (23.52 billion pounds) mining company, which competes with Brazil’s Vale SA VALE5.SA for the rank of the world’s top nickel producer. It is also the world’s largest palladium producer.

Deripaska and Potanin, who is Nornickel’s largest shareholder, have periodically been at loggerheads since Deripaska’s aluminium group Rusal (0486.HK) bought a stake in Nornickel just before the 2008 global crash. Rusal currently owns 27.8 percent of Nornickel.

Chelsea soccer club owner Abramovich stepped up as a “white knight” minority shareholder, to act as a buffer between Potanin and Deripaska in 2012.

The peace deal involved a five-year lock-up period, during which they could not sell most of their Nornickel stakes. This ended in late 2017.

Potanin made an offer to purchase a stake in Nornickel from Abramovich and his partners, Potanin’s asset manager Interros Holding told Reuters on Friday.

Potanin also received a counter offer to buy the stake from Abramovich and partners, in line with a Nornickel shareholder agreement, Interros also said. Interros did not disclose the size of the stakes involved in the offers.

Their agreement has a “right of first refusal”, which means that a shareholder who gets an offer for his stake should offer it to the other two participants of the agreement. It was not clear whether Abramovich also offered his stake to Rusal.

Abramovich and his partners hold 4.2 percent in Nornickel, via Сrispian, while their total stake is estimated at 6.3 percent. Potanin, also Nornickel’s chief executive, has 30.4 percent of Nornickel.

Rusal is now seeking an injunction in a London court to block the possible deal, Interros said. Interros also said it believed Rusal’s claim against the possible deal was unjustified.

Stephen Phillips, the judge hearing the case in the London court, said on Friday he would allow parties involved to delay the injunction hearing until the week of March 5. The parties in the case also asked the court for a trial before June.

A lawyer for a firm controlled by Potanin told the court that financing for the potential purchase of the Nornickel stake from Abramovich was already in place.

Rusal and Nornickel declined to comment. A representative of Abramovich also declined to comment.

SHARES FALL SHARPLY

Nornickel shares were down more than 8 percent in Moscow on Friday, underperforming a 0.4-percent decline in MICEX index .MCX.

Analysts at Aton said: “The (possible) sale of Roman Abramovich’s stake after the end of the lockup period is negative for sentiment, but unlikely to trigger a turnaround in the operational or dividend strategy of the nickel producer.”

Nornickel’s dividend payments have been important for all shareholders, especially for Rusal in years when global prices for aluminium which it produces were weak.

In 2012, the peace deal between Potanin and Deripaska was brokered by the Kremlin.

“The Kremlin cannot get involved in relationship of shareholders ... We are following this on the news,” Kremlin spokesman Dmitry Peskov told reporters on Friday.

“The company is developing dynamically and is demonstrating very positive results. We hope that ongoing discussions, if they really are ongoing, will not affect the positive dynamic of the company’s development,” he added.

A source familiar with the situation said that Deripaska did not want to remain as a minority shareholder in Nornickel if Abramovich were to sell his stake, leaving Deripaska one-on-one with Potanin.

“That is why he is trying to freeze the process,” the source said.

Reporting by Polina Devitt in Moscow and Peter Hobson and Alistair Smout in London; additional reporting by Anastasia Lyrchikova in Moscow; Editing by David Holmes and Jane Merriman